Monster’s Results Come In Better-Than-Expected, Taking Stock Price Higher
Monster’s (NASDAQ:MWW) revenue declined by 2% sequentially and 3% annually during the third quarter to $191.2 million. However, the results came in above market expectations, leading to around 10% jump in its stock price post the earnings release. Non-GAAP EPS was seen at $0.05, outperforming the company’s initial guidance of $0.00 – $0.04.
Monster’s business has been struggling in the recent past due to increased competition and weakness in the international region. Hence its stock has fallen by over 40% during 2014. But we think the worst is now over since the company has started to see progress from its growth strategies, which include expanding the number of job listings and candidate profiles, leveraging social media, and adding more flexibility to its pricing plans. Bookings in North America picked up recently and the company is expected to see sequential growth in revenue in the fourth quarter. The re-alignment of the sales force to prepare them for newer products and services is now complete, and this could result in acceleration of top-line growth in the near-term.
We are in the process of revising our $6.91 price estimate for Monster’s stock.
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See our complete analysis for Monster
Progress Seen Against Growth Strategies
Monster has taken several strategic steps to revive its business. It has drastically raised the number of job listings on its platform by aggregating jobs from both regular and social sources, and leveraging the latest trends in hiring. The number of U.S. job listings has increased from 250,000 in the beginning of 2014 to 3 million in August and over 4.5 million currently. It aims to have around 7 to 8 million job listings across its global network by the middle of next year. [1] We believe this target is impressive and once this feature is released widely, it should help pull in additional traffic and engagement on the platform.
The company has also begun to leverage social networking, with its product ‘Monster Twitter Cards’, allowing recruiters to reach out to passive candidates on Twitter. This initiative has seen early progress and we expect the company to come up with more products in the future to bolster its social advertising capability. We believe the success of this social strategy is key to long-term success for Monster, considering rising competition from other players such as LinkedIn. The integration of TalentBin has expanded Monster’s candidate database to more than 150 million profiles, and around 200 million more profiles will be commercialized in the near-term. [1] Since this product allows access to passive profiles from the entire social web, we believe this product could attract more recruiters, who look for candidates in specific job verticals.
Revenue Performance Across Geographies
Revenue from Careers-North America slipped by 1% on a year-over-basis due to lower demand from large enterprises and government bodies. However, the adjusted EBITDA margin in this segment remains high at around 25%. The recent products and services rolled out in North America, have started to gain traction and resulted in 7% annual rise in North American bookings. [1] We expect revenue growth in this segment on a sequential basis in the fourth quarter.
Revenue from Careers-International fell by 4% annually owing to 6% decline in the European business, which accounts for the bulk (70%) of revenues in this segment. [1] This was partially offset by 2% revenue growth in the Asia Pacific region. While certain European markets such as the U.K. and Belgium performed well, others including Germany, Netherlands continued to be challenging for the company. Strong demand in the Korean business carried the Asia Pacific results during the quarter. On a constant currency basis, we expect the international business to pick up sequentially in the fourth quarter. This segment is unprofitable, and we’d be closely tracking the success of Monster’s new strategy in the international region over the coming quarters to model its future profitability outlook.
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Notes:- Monster Worldwide’s (MWW) CEO Timothy Yates on Q3 2014 Results – Earnings Call Transcript, Seeking Alpha, November 4, 2014 [↩] [↩] [↩] [↩]